Boric Faces Big Leadership Test in Chile Constitution Vote

Matthew Malinowski
·4 min read
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(Bloomberg) -- Chile is gearing up for a historic referendum on a new constitution that would reshape the rules governing a country traditionally known as an investor favorite.

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The yes-or-no vote Sunday will likely set up years of intense political wrangling, while posing the biggest challenge yet to the leadership of the nation’s progressive president, Gabriel Boric. He came to office as Chile’s youngest-ever head of state, supporting a new constitution to tackle inequalities and protect the environment.

Voters will decide to either approve or reject the charter produced over a year by a left-leaning Constitutional Convention in response to the worst social unrest in four decades. In doing so, they will choose whether to replace the current more business-friendly document that was enacted during the bloody 1973-1990 military dictatorship.

Polling indicates the new constitution will be shot down, reflecting unease over polemical articles including ones that eliminate the senate and allow a parallel justice system for indigenous groups. It would also scrap the ability to declare a state of emergency to restore public order, an idea that runs foul amid a spike in crime that has hurt Boric’s popularity and become voters’ top concern.

Rejection would throw cold water over an anti-establishment wave that in the past three years delivered a drubbing to traditional parties in one of Latin America’s richest countries and culminated with Boric’s rise from student protest leader to head of state.

But there are chances of a surprise, given opinion surveys have erred in the past and also that this will be the first obligatory vote since suffrage became optional in 2012, meaning millions more will cast their ballots. Tens of thousands of supporters of the new constitution thronged Santiago’s main thoroughfare to mark the end of the campaign late on Thursday, overshadowing a much smaller and more subdued gathering of people favoring the document’s rejection. Electoral authorities banned the publication of referendum polls from Aug. 20.

Either way, Chile’s referendum marks the gateway to further negotiations on the country’s basic laws with Boric as the top protagonist. The 36 year-old president is emerging as the main caretaker of a constitutional process that will last longer than expected, looking beyond Sunday’s vote as he seeks to assure broad legal changes to unlock his ambitious social agenda.

“Very early on, President Boric’s government tied itself to the result of the referendum, a move that’s seen as an error today,” said Marco Moreno, director of the school of government at Universidad Central in Santiago. “They always suggested that their plans were directly linked to the ‘approval’ outcome.”

That adds to a challenging scenario for the president, who is also navigating a dour outlook with slowing economic growth and galloping inflation after less than six months in power.

Market Boost

Investors see the rejection of the new charter as giving a boost to local markets. While LarrainVial says the peso could strengthen beyond 850 per dollar and the IPSA stock exchange could top 6,300 if the document is voted down, local fixed-income analysts surveyed by Bloomberg see opportunities in lower rated corporate debt or long-dated sovereigns.

Indeed, the current charter has been credited with underpinning decades of economic growth, turning Chile into a strong recipient of foreign direct investment.

“Political uncertainty will continue to be high regardless of the outcome of the referendum,” Credicorp Capital economists Daniel Velandia and Samuel Carrasco wrote in a note. “However, rejection would set a precedent that the population still wants social and political changes but not as radical as those initially proposed.”

Recent events are hurting efforts to assuage voter concerns about the new charter. On Aug. 25, Boric accepted the resignation of Social Development Minister Jeanette Vega after local media reported that one of her advisers had contacted Hector Llaitul, the leader of an indigenous organization who is suspected of being involved in arson attacks.

Rejection of the new constitution may set off another round of protest violence by fringe groups that vandalized stores, public transportation and infrastructure during 2019-2020 unrest, and have periodically resorted to such attacks since then.

Chile’s presidency declined to comment on this article. In an interview with Time published Aug. 31, Boric backed the new charter, saying that while there are parts that need more clarity, it still represents “a big step forward for Chile.”

As the referendum approaches, Boric is moving to overcome polarization and lay the groundwork for dialogue regardless of the result, said Pamela Figueroa, a political scientist at the Universidad de Santiago.

“It’s clear that there’s going to be a process of legislative debate after the plebiscite,” she said. “The president has given special attention not only to informing the population, but also to bringing people with different viewpoints together and listening to different political actors.”

(Updates with details on demonstrations in sixth paragraph)

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